China's Not-So-Golden Oldies

The world’s most populous country is set to become the world’s
largest ageing country, with implications for the generation who will have
to support them, and for marketers too. Aruna Natarajan explains.

As with any China-related statistics,
the absolute numbers are quite
startling. There are close to 100
million 65 years+ people in China
today. One in every two 60+ Asians is Chinese
and one in every five 60+ people in the world
is Chinese.

By 2010, China will no longer be the world’s
most populous country. That will be India.

By 2010, China will have 300 million people
older than 50. That’s almost as many
people as the US will have by then.

From 2010 onwards, China’s ‘sandwich’
generation, 20-49 year-olds and the core
consumers for a majority of marketers,
will actually start shrinking.

By 2030, China’s total population will
start shrinking.

By 2050, close to half the population of
China will be older than 50. That’s more than
600 million people, and China’s population
will be lower than it is today.

By 2050, China’s elderly population will
outnumber India’s by 103 million, whereas
the total Chinese population will be
smaller than that of India by 51 million.

A combination of factors including controlled
birth rates, lifestyle changes and improvements
in medical care have led to an ageing
Chinese population. Strict population policies
implemented by the Chinese Government
and the role of the state and work units in
permitting marriages have controlled the
growth of the population.
At the same time, better nutrition and
advances in medical science have increased the
average life span of the Chinese person. The
above-50 segment is growing significantly and,
within this age group, the 60+ population
accounts for more than 50%.

For years the world has worried about the
Chinese population and how there are far too
many Chinese around. But going forward, a
far bigger problem will be how there will be
too few Chinese around. This is particularly
important for the Chinese themselves. Their
economy, known as the factory of the world,
depends on an endless supply of young, desperate
workers willing to work 16 hours a day, at
meager wages. A population decline will
reduce the supply of factory workers, increase
the upward pressure on wages, and make
goods made in China uncompetitive when
compared with other parts of the world like
South America. Catholicism (a barrier to birth
control), proximity to the US (China’s largest
trading partner) and poverty combine to
reduce costs in that continent and are likely
to make it more attractive for manufacturers.
In short, population implosion is going to
hurt China’s GDP, by decreasing the
productivity of the nation and putting less
money in the pockets of Chinese employees
and consumers.

Different shades of gray
Ageing population is a demographic issue which
many countries have been facing for years.
Japan is currently the oldest nation in the world
and many European countries like Italy and
Germany are fast closing in. But compared to
these other nations, China is in a unique position.
Countries like Japan, Italy and Germany got
rich first before they got old, but the same
cannot really be said for China. In terms of
development indices and prosperity, China is
still closer to developing nations, but in terms
of population demographics it mirrors the
developed nations of Europe and Japan.
Additionally, China lacks the social safety nets
of the Western nations and Japan to care for
the elderly.

Unfortunately for China, its GDP growth has not
been able to keep pace with the declining
fertility rate, thus causing an imbalance
much more acute than anything seen in other
countries with ageing populations.

Over the last few decades, China has had
one of the strictest population policies the
world has ever seen. The one-child policy
has been implemented so successfully that in
urban China an entire generation has grown
up without siblings.

Whilst this strategy may have succeeded in
raising the standard of living in the short term,
in the long term it has created an entirely new
demographic crisis; going into this century,
China is going to be the oldest poor country in
the world.

And given the unique position that China is
in, it’s difficult to take corrective action by
emulating the model of Western countries or
Japan. Let’s take the example of Japan; it has
been living and coping with the phenomenon
of an ageing population for a while now. Last
year for the first time, the number of deaths in
Japan outstripped the number of births and
the population of the country actually declined
by 19,000. The current fertility rate of less than
1.3 increases the pressure on the working
population significantly.

But there are a few critical factors which
make the situation in Japan quite different
from what China faces. Japan as a nation
became rich before it became old. Also, the
baby boomers generation in Japan who are just
about entering the over-60s age group, are a
well-qualified group and are the custodians of
years of accumulated technical and managerial
skills. This, coupled with the fact that the
average life expectancy is 82 years and still
climbing, makes it easier for the government
and the corporate sector to respond. Japan has
identified that the solution lies in fixing
employment and retirement systems so as to
allow people to work more easily for more
years to come.

Changing mandatory retirement laws and
removing age restrictions on hiring are other
changes that are being actively discussed to
battle the problem. This way, Japan will be
able to keep its ageing workforce employed for
longer. Japan is also slowly opening corporate
doors to women, an area that was previously a
male bastion. This again will help spread the
burden of supporting an ageing society among
a larger workforce.

Western countries grappling with the
problem of an ageing population have another
big advantage apart from trying to keep people
working longer: immigration. Immigrants
moving en masse to Europe, the US and even
Australia help support the tax burden of the
older population and also provide the numbers
to keep the nation young.

In China, current rates of unemployment
and underemployment are already so high that
the question of immigration or keeping older
people in the workforce for longer simply does
not arise. Also, the equivalent of the baby
boomers generation in China have spent most
of their lives working on state-owned
enterprises and the skills they have are not
really suited for the current rush of private
sector jobs flooding the market. The gender
equality mandated under the communist
regime has already ensured a place for women
in the workforce, so there is no new ablebodied
group to look towards to share
the burden.

Caught in a jam
In a sense, Chinese society is closer to other
Asian societies, where the main investment
that people can make for their future is their
children. As in India, thanks to the absence of
government-mandated social security and
medicare, the older generation lack independence
and rely on their children to take care of them
in their old age.

That brings us to the crux of this demographic
crisis. With the changing demographics
of the Chinese population, the bigger fallout
is not the growing consumer segment in the
60+ age group, but the impact that this
segment is likely to have on the core 25-44
consumer group. With an increasing retired
population to support and the next generation
to look out for, our core consumer group
is bound to have increasing pressures on
their disposable income and this is likely to
significantly impact their purchase decisionmaking
process and consumption habits
across a variety of categories. Previously the
commonly-used adjectives to describe this age
group included terms like upwardly mobile,
young working class, etc. But moving forward,
a key descriptor for this consumer group will
be the ‘sandwich generation’.

Aruna NatarajanMindShare, ShanghaiJerry’s Jam

This article originally appeared in volume 12 of WPP's Atticus Journal.